DT2301 - Algeria: Unilateral relief

Tax on income of foreign construction companies (impôt sur le revenu des enterprises étrangeres de construction (IREEC).

Tax on profits of non-commercial professions (impôt sur les bénéfices des professions non- commerciales) where charged on non-Algerian taxpayers having no permanent establishment in Algeria.

Petroleum tax (impot petrolier).

Impot sur le revenu global.

Admissible in certain circumstances

L’impôt sur les bénéfices des sociétés revenus des enterprises étrangères (IBS)

This tax is dealt with in Articles 156 and 157 of the Algerian Direct Taxes Code.

Article 156 provides for a withholding of tax at source on income payable to foreign companies that do not have a permanent establishment in Algeria and that trade on a temporary contract basis. Article 157 details when withholding should be made.

When introduced, this withholding tax, although based upon turnover, was intended to be a tax on profits.

On this basis, for years up to 31 December 2000, credit could be given for this tax against the resulting United Kingdom corporation tax liability, having regard to the possibility of restrictions on credit if there was any measure of extra-terrestrial taxation (see the guidance in DT2302).

However, with effect from 1 January 2001, there was a consolidation of the Algerian Tax Code. This involved turning the above named tax from a direct corporate tax (at a rate of 18%) into a hybrid (at a rate of 24%) that included an element of value added tax (VAT). Because of this, credit can no longer be given for such a tax under the provisions of S790 ICTA 1988 et seq for tax paid in respect of profits arising after 1 January 2001. However, the withholding tax will be an allowable deduction under first principles.

Under S156A of the Algerian Tax Code, it is possible for a company to opt for a taxation regime based on the actual profits arising in Algeria. Any corporation tax paid in Algeria as a result of exercising that option will be admissible for credit against the United Kingdom corporation tax liability on the same income.